Bubble-Gum Face and Other Inflation Tragedies

So many of us have done it. Eight years old, half a mouth full of bubble gum and our friend challenges us to a bubble blowing contest: Biggest bubble wins. So there we go, blowing harder and bigger until that bubble is double the size of our head. But still not satisfied, we try that ONE MORE LUNG FULL of air and...POP...we're peeling gum off our face and out of our hair for the next few days!

That's what happens when bubbles over-inflate. But bubbles are not limited to chewing gum. In fact, talk of "bubbles" has reached almost common-place usage in the economic and financial world. And still, like our 8-year old self, we think maybe we can squeeze one more breath in there...

Today, I was reading a report from the good folks at Casey Research, a fine outfit for financial news from the proper perspective. The report was entitled "What Inflation Could Look Like In 2014" and it had some very interesting information. In particular, it made an historical survey of past "inflationary" episodes in our country and found that drastically higher prices usually followed a "benign inflation" within two years. Here are their findings in chart form;

Now the reason I put the word "inflation" in quotation marks above is because I know, as the Casey writer does, that higher prices are NOT inflation, but rather the symptom of an underlying cause. And what is that cause? In two words: monetary debasement.

Monetary debasement (true inflation) always occurs when new money is introduced into the economy without a concomitant increase in productive output. In simpler language, inflation is the increase in the money supply without any increase in goods or services. It is the DEVALUING of every existing dollar. This, necessarily, results in higher prices since it takes more of these lesser valued dollars to buy the same amount of product.

So here's the bad news: We (our country and its leaders) have already inflated wildly. Again, from the Casey report, "the US monetary base stands at $2.72 trillion, a 168% increase since October 2008." Did you catch that? 168% increase in currency in three and a half years! That bubble is mammoth and still we hear talk of "stimulating the economy", "quantitative easing" and "bailouts"...maybe we can blow one more lung full of air in there...??? Rising prices are not an "if", they are a "when". Of course, we have already seen significant increases, but I'm afraid that a four-fold increase in the inflation rate (or more) is very likely in our near-term future.

The good news is we can do something to protect ourselves. Our Casey reporter again has a very nice suggestion: "If 10% of your total investable assets (excluding equity in your primary residence) aren't held in various forms of gold and silver, we think your portfolio is at risk." I would second that motion, but add to it the recommendation I recently made to my clients: Up your "intrinsic worth items" to 15% and diversify in that category. In other words, take 15% of your total net worth and put it into tangible, real, useful assets, including gold and silver, and get learning how to use them.

And, of course, never forget to pray!

Effects of a Dishonest Money System

For this month's blog, I am going to use an excerpt from the book, Money! Questions and Answers by Fr. Charles Coughlin circa 1935.  Chapter VI of this book, Effects of a Dishonest Money System, offers 15 rather chilling prophecies when looked at with the benefit of 75+ years of hindsight.  And while Fr. Coughlin was eventually smeared with the epithet "anti-Semite", I have to wonder if this slander was meted out in retaliation for his exposure of the truth.

In any case if you read his predictions with an open mind, I believe the only conclusion you can draw is that he did approach the truth with amazing accuracy.  And while I have maintained for some time that we are "slaves" to nearly unknown masters, it is good to get confirmation (see predictions 12 and 14 below) from any source.

Finally, though I originally intended to make a running commentary throughout the excerpt, I have decided to let Fr. Coughin's words be read without interruption.  Suffice it to say at the beginning that the best financial plan that any of us can hope for is one that will MITIGATE the "effects of a dishonest money system" rather than eliminate them.  To eliminate them, an honest money system is needed.  Now isn't that a radical idea?!?

Effects of a Dishonest Money System

 What will happen if the present money system is continued and if the present policies endure?
 

1. Private individuals will coin money for their own personal gain.
2. Corporations organized for production, such as automobiles, steel and textiles, will be under the domination of the private money creators.
3. The government itself will be dominated by the money plutocrats.
4. The press, dependent upon advertising received from banker-dominated corporations and commercial houses, will continue to deceive people.
5. The educational system will continue to ostracize the truths of economics from our schools.
6. An un-informed citizenry, forced to work either on the mortgage-controlled farms or in the banker-controlled industries, will receive a less-than-living annual wage.
7. Through the international manipulation of gold and money engineered by a small group of money creators living in each country, wars will continue to ensue.
8. The only prosperity which will come as a breathing spell will be that [false] prosperity enjoyed as we prepare for war and fight the war.  [Bracketed comment added].
9. The issue of non-productive bonds will continue to sap the profits of production through the process of taxation for the benefit of the creators of debt.
10. Those who now condemn loudly the danger of inflation in order to save the present money system are those who are introducing a greater flood of inflation than was ever experienced by any nation in the world.
11. The citizens, weighed down by the unbearable costs of war and depression, will be inclined to blame a democratic form of government and unwittingly relinquish the liberties already won for the bare necessities of life, which the plutocrats will allow them only at the sacrifice of liberty.
12. Dictatorship, be it that of the communist, of the fascist or of the extreme socialist, will necessarily ensue.
13. Christianity, which teaches the principles of social justice and upon which is founded the sovereignty of the Government’s right to coin and regulate the value of money, will be disavowed because Christianity will be blamed for putting war into the world instead of peace, poverty instead of prosperity and hatred instead of love. 
14. The children of future generations shall be the scape-goats whom we are forcing to bear the sins of an unintelligent money system which, anticipating their birth, already has mortgaged their life’s income.
15. Chaos in law, in government and in civilization eventually will result.

 Money! Questions and Answers, Fr. Charles Coughlin, Chapter VI, p. 143-144.

A Gift Exchange

It has become commonplace this time of year to bemoan the "commercialization" of Christmas. This will not be one of those times.

Frankly, it seems that the growth of commercialization (by this I mean the frenetic gift-buying) is nothing more than the effect of a growing loss of our ability to express true love for our families and neighbors. It is the materialist's answer to a spiritual problem. We want to say "I love you" in an easy way, but there is no easy way.

If an exchange of gifts is a means by which we say "I was thinking about you" or "I love you", then I say we need more "commercialization". But the people who decry the gift-buying frenzies of Christmas are not complaining that there is too much love being exchanged, but that there is no love in our gift exchanges. Now that is a different matter altogether.

Unfortunately, the answer usually proferred for the over-commercialization of Christmas is a syrupy sentimentality that is equally vacuous. Somehow baking cookies (weren't those bought too?) and making a home-made card is more "loving" than buying them at Wal-mart. I agree that putting more thought and effort into our gifts is a good thing, but does that necessarily translate into more love being conveyed or that a truer gift is being given?

Now, at this juncture, you might be tempted to call me Scrooge and shout bah humbug at me! But again, I am all for the INCREASE of love as evidenced by the exchanges of gifts. I just contend that neither side of the commercialism debate is really hitting the mark.

The true malady, as I see it, is that none of us are really capable of fully expressing the depth of our love, gratitude and appreciation to those we most want to know it. It is as if we are prisoners of our own thoughts and bodies.

Indeed we are. We all struggle with our own finiteness. We have limited time, limited abilities, limited wealth and other human frailties. And yet, we sense something of the Infinite whenever we experience love. Somehow when we share love, rather than it being divided, it multiplies. Wow!

Sometimes, selfishly, in our quest for that thing that never exhausts itself, we seek the feeling rather than the Cause of that feeling. That is why gift-giving, commercialization or sentimentality finally exhausts itself and rings hollow. It stops becoming about others and, consciously or not, becomes about us.

Christmas is an annual reminder and corrective to us. Christmas is when the Infinite intersected with the finite. Christmas is when Love was Incarnated, took on our flesh (and limitations) and showed us the way to true Love. Christmas is a message of hope and humility. Christmas reminds us that a Savior is born to those who could not save themselves. Christmas is the beginning of the greatest gift exchange of all time:

"Greater love than this no man hath, that he lay down his life for his friends." John 15:13.